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A lot has changed in the two decades since the SEC’s 2004 Compliance Program Rule, which increased requirements around compliance procedures for investment firms, including designating a chief compliance officer for the first time.
The role of compliance in investment management — as well as the overall industry — has continued to evolve. Through increasingly close partnership with technology and operations, compliance officers are now more comprehensively focused on operational risk where the design and implementation of technology systems play a critical role.
A newer vertical within FinTech called RegTech has benefited directly from this paradigm shift. Regulation technology or “RegTech” emerged post-2008, promising to reduce the overall cost of compliance and mitigate regulatory risk through purpose-built software. Fast forward to today, and a wide variety of RegTech solutions have been introduced to buy-side firms to address things like:
- Regulatory Data Management
- Regulatory Reporting
- Registered Fund Compliance
- Investment Monitoring
- Best Execution & Trade Surveillance
- Compliance Program Management
- InfoSec & Cybersecurity
Now, this might certainly sound appealing. What investment manager doesn’t want to reduce the overall risk and costs of running their business? But I’d argue that RegTech solutions have not delivered on their promises. The implementations are not agile or speedy, and the integrations with legacy systems have been anything but seamless. You simply cannot treat a symptom (high compliance costs) without addressing the root cause of the problem (siloed legacy systems and data).
The truth is that managing compliance need not be difficult or even costly. The solution? Technology designed from the start to adapt. Specifically, firms can run their investment operations on extensible software with an open API architecture that can easily adapt to even the most complex regulatory requirements.
What today’s compliance executives need is a highly extensible, unified investment management platform.
Taking a Platform Approach to Regulatory Compliance
At Ridgeline, we take a platform approach to everything that we do, including compliance. We know that the role of the compliance officer extends far beyond the investment guidelines and rules codified in the trade order management system. Since our inception, we’ve integrated compliance across the platform. Compliance in Ridgeline was never an afterthought or bolted on. It’s a fully-integrated, configurable compliance engine that gives you advanced control to meet client requirements and proactively mitigate risk at the firm, account, and regulatory levels on both a pre-trade and post-trade basis.
Better investment monitoring with increased data availability
As a unified platform, compliance monitoring and reporting has unparalleled access to data objects and real-time updates to those objects not easily available in a siloed-system infrastructure. This allows users to create even the most complex multi-asset investment monitoring rules (with no code!) – referencing data in upstream applications such as client management, market data, portfolio management, trading, and accounting.
Rapidly respond to regulatory change with our open API library
Need to change the major shareholder reporting limits? Update restricted lists? Respond tactically to a short sale ban or other regulatory requirement? Ridgeline lets you take complete control over the governance of your investment monitoring program. All compliance rules and reference data are updated in real-time with all changes cascading across the entire platform.
Leverage a comprehensive set of APIs to fulfill annual compliance, periodic regulatory reporting, and transaction reporting requirements.
Enhanced compliance controls with configured workflows
An effective compliance program is capable of monitoring user actions. In an event-driven architecture the compliance service can monitor user actions in other applications and determine the next step through configured workflows. When a new client is onboarded, a task can be assigned to deliver Form ADV. Breach a regulatory reporting threshold? Simply kick off a workflow to extract, normalize, and review the required data.
Whether it’s reporting to the investment company board of directors, communicating with an end investor, or generating and submitting a filing to the SEC – Ridgeline has you covered.
Conduct comprehensive forensic analysis with system-wide audit trails
Imagine all of your critical investment activities, operations, and communications performed on a single platform, complete with a unified data model and robust audit capabilities. Performing forensic analysis on investment model and strategy changes or transactions that occurred three years ago isn’t so difficult anymore. Ridgeline can represent data across various objects to give you a complete 360-degree view of the portfolios, holdings, transactions, compliance rules, and violations as they existed on that very date.
Less time spent conducting vendor due diligence
To date, Ridgeline has seen tremendous success displacing not 2 or 3 critical systems but upwards of 9 critical systems. This drastically simplifies vendor management, business continuity, and disaster recovery plans. It also limits the amount of annual due diligence required to ensure effective controls have been implemented at each vendor to safeguard your client’s assets and personal information.
Streamlined business continuity and disaster recovery plans
As a cloud-native platform, we have implemented a robust multi-regional, fault-tolerant disaster recovery strategy that allows us to restore customer operations in the event of an outage. Ridgeline was built with security-first principles in mind (you can read more about why it matters to us here).
A realistic pathway to leveraging AI for regulatory compliance
Ridgeline’s modern approach to technology has positioned us at the forefront of innovation in the industry. We recently released our first AI-based functionality into the product, and are actively exploring ways to leverage generative AI to securely manage compliance and regulatory requirements. If Ridgeline didn’t already have a unified data model that’s primed for use with AI, this would simply not be possible.
Compliance officers are operational risk managers. In the era of the technical compliance officer, this mandates a seat at the table when determining the optimal design and implementation of your critical systems. The right decisions made in this arena will pay dividends in the future, allowing you to address new asset classes, financial markets, investment strategies and client types while maintaining regulatory compliance, mitigating operational risk, and reducing the average cost to serve your end investors. We'd welcome the chance to learn more about your goals and how a single platform can help your firm mitigate risk. Please reach out at hello@ridgelineapps.com.
